China’s role as a dominant global economy is undeniably secure. For international law firms faced with the maturity of Western markets, this presents a plethora of opportunities.
Lovells has one of the most developed networks of all the UK firms operating overseas, making it arguably one of the best placed to take advantage of all that China has to offer.
Two years ago the firm had a visionary idea that went some way towards proving this: the firm felt it could steal a march on its rivals by setting up a legal alliance with Chinese firms outside the major centres of Beijing, Hong Kong and Shanghai, enabling it to gain unprecedented access to clients across the massive country.
After months of due diligence, carried out largely by Beijing head Robert Lewis, the Sino-Global Legal Alliance (SGLA) launched last September with nine Chinese members ;(TheLawyer.com, ;3 September 2007), with that number rising to 10 in May this year.
Although still in its nascent stages, from the point of view of its members at least the alliance is proving even more fruitful than could ever have been imagined.
Cheng Shoutai, managing partner of the SGLA’s newest member Tahota Law Firm, says the alliance is not only significant for the firms within it, but for the Chinese legal profession as a whole.
“Joining the alliance was a major event in the history of the Chinese legal profession,” he says. “Our history has been quite short – just about 30 years. The economy in China has been growing very fast, but in terms of the legal profession there’s been a big gap between China and the rest of the world. Joining the alliance is about raising the standard of the profession in China.”
A bold objective, particularly as in a country with a population of 1.3 billion the 10-firm SGLA (specifically not counting Lovells as being part of the local legal market) represents a tiny part of the profession.
But, as Shoutai points out, what the firms learn from Lovells they can then pass on to other firms within their regions.
“Lovells is way ahead of Chinese law firms and the members of the alliance have already benefited from it,” he explains. “Once we’ve benefited ourselves, we’ll become leaders too and will be able to bring forward the legal profession in China. This is an extremely significant page in the development of the legal sector in China.”
This positive take is supported by the views of other member firms. Gao Feng, a partner at T&C Law Firm, says T&C joined the alliance thinking it could learn a bit about management. Since joining, he says, the firm’s aspirations have risen sharply.
“When we joined the alliance it was a very simple idea: to improve management,” he explains. “We were hoping to learn how to structure our management as part of an effort to reform the firm.
“Now we’re clear that the objective is to become a firm like Lovells, with a clear strategy so that we can operate like a commercial concern. That’s quite a change of mentality.”
Qiu Yuxia, a partner with Deheng Law Firm, agrees, pointing out that the firm’s motivation for joining the alliance was to become one of China’s truly first-class law firms.
“We’re trying to find out what the secret of UK firms’ success is,” she reveals. “That was the motivation for the partnership – we unanimously agreed to join to try to learn more.”
Certainly Lovells is well placed to fill that teaching role: as one of the UK’s leading law firms it has transported its business model across the globe with varying degrees of success. Having been in Hong Kong since 1982, Beijing since 1992 and Shanghai for the past five years, it has a decent handle on the local markets, while Beijing head Lewis’s commitment to the country (he has lived there for 15 years and is married to a Chinese citizen) is also key.
Despite this, and despite the huge amount of energy Lovells – and Lewis in particular – is putting into the project, other lawyers operating in the region remain sceptical.
“It’s hard enough having an alliance with one local law firm,” comments Gary Lock, managing partner of Herbert Smith’s Beijing office. “I just don’t know what they can make out of this whole arrangement.
“Most of the large-size transactions are handled by the major firms in Beijing, which tend to attract the best talents and have the most up-to-date knowhow.
“Most major transactions also require the advisers to have a base in Beijing where the approvals from government are obtained. The fact that there’s not a Beijing firm in the alliance is a major disadvantage.”
These sentiments are echoed by lawyers at other international firms operating in China, with some claiming the alliance “hasn’t had an impact”, while others say the SGLA has been so low-profile that they do not have an opinion on it.
One partner in the Hong Kong office of a UK firm downplays the significance of the alliance, saying: “I imagine the attraction to the local firms is that it gives them a chance to get more work and receive training while not committing to an exclusive relationship.”
There are questions, too, about how the lawyers across the alliance will integrate with each other, given that Chinese lawyers effectively operate independently from their partners, with firms more akin to a barristers’ chambers than a traditional partnership.
The SGLA admits that there are doubts, even from within its ranks, but stresses that these are not insurmountable.
“In the process of reviewing firms we found that people thought the idea of the alliance was good, but the biggest concern was who the other firms were,” explains Lewis. “T&C, for example, knew it was a clear leader in Hangzhou, but it was concerned that the alliance would dilute its brand.
“It didn’t click until we told it who the other law firms were and it had confidence that they were the best firms.”
Having overcome his own initial doubts, Feng at T&C says the challenge now is to convince everybody else of the alliance’s merits.
“Many people are watching what we will achieve,” he says. “At the beginning there was a lot of doubt – some people even doubted the objectives. Now it’s beginning to move forward, but we can’t say that we’ve done it – partly because it’s still a relatively small group of firms and also because we’re focused on getting ourselves ready. It will take some time to show our achievements.”
Shoutai at Tahota agrees, saying: “Lawyers in China, including government officials responsible for regulating the profession and other organisations at a regional level, have doubts.
“These doubts will go away once the fruits of this alliance are there for people to see. Lovells will play a role internationally and the firms in the alliance will lead regionally.
“This is eye-catching, and that’s a good thing. This alliance will be like a blossoming flower.”
Certainly the SGLA firms are already proving the doubters wrong when it comes to integration.
Shoutai, Feng and Doheny’s Yuxia are in agreement that the level of cooperation between the Chinese firms is far greater than was anticipated when they signed up for the alliance.
“The interaction is much more than we initially imagined,” insists Feng. “We thought it would be us talking to Lovells, but in effect there’s a very strong feeling between the members of talking to each other.
“We’re not just cooperating in business terms, but exchanging management ideas. We’ve also been visiting a lot of other member law firms. There’s much more mutual recognition between us now, and that’s great.”
“Before this we’d refer some lawyers to clients,” chips in Yuxia, “but through this we know we have people we can really rely on. We really believe we’re on the same standing with these law firms.”
For Lewis the story of the SGLA is compelling regardless of the current market view, with the main challenge now being to communicate just how compelling.
“As we tell the story people understand it immediately, but there’s still a lot of work to be done to get the message out,” he says. “It takes a few years before the message is really bedded down and people see that the reality is consistent with the hype. The second year will be pivotal.”
Lovells certainly took a leap of faith in establishing this alliance, but given China’s global importance and the geographic reach of the alliance within China, that leap may be less of a gamble than some may think.